SinoPac Financial Holdings Co (永豐金控) yesterday announced that it would allow the agreement with Industrial and Commercial Bank of China Ltd (ICBC, 中國工商銀行) to acquire a 20 percent stake in its banking arm, Bank SinoPac (永豐銀行), to expire, as the companies do not expect political hurdles to abate any time soon.
Since its announcement in April 2013, the NT$20 billion (US$604 million) deal had been delayed as the legislature remains deadlocked over the cross-strait service trade agreement, which would raise the cap on investment stakes in Taiwanese financial institutions by Chinese counterparts from 5 percent to 20 percent.
“We have misread the political situation in Taiwan and we cannot continue in the endeavor amid such uncertainty. It would not be fair to our clients and shareholders,” Bank SinoPac president and spokesperson Michael Chang (張晉源) said.
“Without the service trade pact, the 5 percent stake is insufficient as a financial investment, and inadequate to form the sustainable partnership we are looking for,” Chang said.
Both parties entered into the agreement with the expectation that the process would be completed swiftly, but as time dragged on, Bank SinoPac found prolonged delays were beginning to hamper its growth.
“According to our terms, ICBC is required to furnish a budget toward its acquisition of Bank SinoPac, yet during the two years’ delay, our bank’s net worth had increased, leading to many procedural difficulties that must go through ICBC’s chain of command,” Chang said.
He said that Bank SinoPac’s net worth at the end of 2012 was NT$7.82 billion and had grown to NT$9.95 billion at the end of last year.
Chang added that Bank SinoPac is one of the few Taiwanese companies that jointly offer tangible products and services with a Chinese strategic partner, such as establishing a Chinese-language service platform that prevents inconveniences caused by differences in spelling conventions, and one-day clearance of wire transfers denominated in US dollars or yuan.
“I have yet to see others in the field establish tangible strategic ties with a Chinese partner that involve allocating board of directors seats and actual operations,” Chang said.
“The operational collaborations between the companies will remain unchanged, and even without an exclusion clause, SinoPac can count on a long-term relationship with ICBC,” he said.
Financial Supervisory Commission Chairman William Tseng (曾銘宗) said the companies need to comply with current guidelines and that as the matter is to be decided in the legislature, there is little regulators can do.
SinoPac Financial Holdings shares fell 1.89 percent to NT$10.40 in Taipei trading yesterday.
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